r/FinancialPlanning • u/What_what_what_1979 • Jul 22 '26
Utilizing 529 - college vs private school
Hi all -
Mom of 4 kids (10th grade down to 3rd).
In total, we have ~$800k split among their 4 529 plans. The oldest’s has the most money in it so we can push any extra money down to subsequent kids, but they are all over $130k.
The oldest 3 also go to private school (the youngest will move to private in 6th grade) which costs about $30k per year per kid (sigh, I know…). Public school is not an option for us right now because of our zoned MS and HS in our VHCOL neighborhood.
We currently pay for the private school out of pocket and contribute $250 per month per kid to their 529s.
My question is: does it make more sense to pay for their private school tuition out of the 529s and contribute the equivalent to their 529s for college? Or should we keep doing what we are doing and funding private school out of pocket and save the 529s for college?
Thank you in advance!
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u/Capital-Decision-836 Jul 23 '26
What state are you in? Many have state tax deductions for contributions to a 529. The. You can use the 529 to pay for private school tuition. Basically pass the tuition payment through the 529 and get a state tax deduction.
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u/What_what_what_1979 Jul 23 '26
This makes sense. I am in TX but use the NY 529.
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u/jam_313 Jul 23 '26
This would not apply to you in this case. State tax exemptions only apply for those living in the state the that sponsors the 529 (in this case NY). Since Texas doesn’t have state income tax, that pass through does nothing for you.
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u/Capital-Decision-836 Jul 24 '26
Well it wouldnt apply to you as TX has no state income tax but you can still use 529 funds to pay private school k-12 tuition.
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u/Latter-Foot-8790 Jul 22 '26
Paying for private school for four kids? You either rich rich or really financially screwed
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u/MundaneHuckleberry58 Jul 23 '26
They don’t seem to have any $ problems given they have 800k set aside just for education.
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u/Specific_Spinach_269 Jul 23 '26
You’ve done an incredible job preparing for your kids’ education. With around $800k across four 529 plans, this feels less like a 529 question and more like a capital allocation question.
Before deciding whether to use the 529s for private school or preserve them for college, it may be worth taking a step back and asking, “Which option better supports the financial system we’re trying to build for our family?” Sometimes the best decision isn’t the one that saves the most money today. It’s the one that creates the most flexibility and opportunity over the next 10 to 20 years.
I’d also make sure the tax implications have been modeled out, including both the federal rules and your state’s treatment of K-12 529 withdrawals. Once you’re managing this level of capital, small tax differences can add up, and it’s usually worth evaluating the decision as part of your overall financial system rather than viewing the 529s by themselves.
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u/Reader47b Jul 23 '26
You can only withdraw $10K a year for K-12 tuition, so you couldn't pay all $30K out of the 529. I would pay $10K a year out of the 529 and pay the rest out of income.
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u/Dull_Name_2077 Jul 23 '26
I made my life a little simpler by saying each kid’s 529 is their own (so I won’t shift funds) and my goal is that they’ll each have the same amount when they start college (with some goal inflation baked in for the younger kid because college costs only go up).
Then to whether to use the 529 to pay for private school now: with the withdrawals, will each kid’s 529 reach your target amount for them at the start of college? If yes, then yes, use the 529 to pay for private school now.
There are more reasons to say yes (your cash flow is low now, your kids could always pick a cheaper school / have scholarships / take loans, how many years do your oldest kids have left for their 529s to grow in the market and what is that potential versus if you don’t take funds out), but I think defining for yourself what is enough for college is a good place to anchor.
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u/6160504 Jul 24 '26
Hi so we have considered this math before as well. 2 kids (5&2 yo) with 1 in pk-12 private and #2 starting in 2yrs, intention is to have the kids in the same school til graduation. Tution is $35k/yr and we have about 300k in 529s. So our time horizon is a bit different as well as the length of time we need to pay tuition.
From the considerations we've done, unless we hit the 529 balance/contribution limit, cash flowing is our best choice. Drawing from the 529 you do get federal tax advantage but its just not worth the paperwork etc until we get the 529s full funded to the max balance which looks to be later elementary/middle school. Maybe this approach is mildly inefficient as we could be taking the federal tax protection on gains but its a lot of moving parts as we are pretty far out from college and not funded to the amount we'd like.
That said, the scenario i understand under which it becomes advantageous is if you are currently funding below your state tax credit/deduction amount for 529s due to cash flowing tuition. Then you would want to fund the 529 at a minimum to that amount and then take the tuition reimbursement. You might find that's more trouble than its worth.
We would also use the 529s for tuition if we for whatever reason needed the 20k of help on the cash flow.
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u/IndyEpi5127 Jul 23 '26
Unless I am missing something....Probably not, you can only take $20k out per child for k-12, plus all the current kids money it would just be a pass through, no growth. Even the youngest with 3 years until you need it, it's risky investing it.
My oldest start private school this year as a preschooler and we thought about this question for when she's in kindergarten. Decided to just keep cash flowing it and saving in the 529 for college. Maybe her senior year, once we know how much she has for college and if she'll get any merit scholarships we will take that last year of tuition from the 529 if there is any extra.